Government officials

If Enron’s senior security professional was aware of what was happening, what steps should he or she have taken to bring the situation to the attention of the proper authorities, including the board of directors, law enforcement, shareholders, and the appropriate government officials? The Enron scandal obviously had a significant number of people involved throughout the food chain who’s judgment was very clearly clouded by the significant intertwining of their jobs and security and hence their future.

It would be safe to say that a very small percentage of employees formed the exclusive subset who were aware of the magnitude of the scandal and would have even remotely considered reporting part or all of the situation to a third party. The Sarbanes-Oxley Act (SOX) now very clearly defines what it deems as a code of ethics to encourage or even enforce as a duty upon employees to report any element of misdeeds they witness at any level. The question arises, however, as to who defines the level of ethics in a person.

It will obviously be based on the years of practice and instinct of a person and is not something that (as such) can be taught as part of formal training. In other words, security professionals in this case would firstly need to be aware that there were unethical practices being conducted, and then make a moral judgment in its reporting. In the event that a security official had indeed uncovered the practices being conducted at Enron, and had committed to the moral judgment of reporting it, he should have sent out formal documentation of key facts uncovered and sent out this communication to all board members individually.

In this letter, he should reiterate the obligations of the CEO, the CFO and the relevant audit firm, and then made a formal investigation request based on the provided information. If the security professional does not receive a response to the letter from the board, the officer should proceed to send copies of the letter to the regulator – the US SEC, as well as to the Government Accountability Office (GAO). The letter should stress the importance of having third party auditing conducted for Enron to ascertain the impact of evidence presented.

If you were the senior security professional at Enron and were privy to what was taking place, what would you have done and whom would you have notified? What might have prevented you from reporting the situation to the proper authorities and the shareholders? My initial reaction in this case would have been to approach members of the external audit team to try and confirm and gauge the impact of the information I had. I would also try to reach out to the audit team to conduct due diligence in the matter.

In retrospect, Arthur Anderson as the external auditing firm clearly was part of the scandal. However, I would be fairly certain in surmising that only key senior members of the audit team would have had knowledge about the unethical practices. I would rather have members of the audit team do the eventual whistle blowing by pointing whom I felt would have taken the right steps in the right direction to ‘discover’ further evidence to seal the case. Aggressive junior and mid level audit team members would have a strong incentive to uncover issues in their audit.

Their careers would be given a significant boost on their discovery and there would be plenty of audit firms wanting to hire a ‘hot shot’ accountant as part of their new audit team. Whistle blowing by an internal employee such as myself on the other hand, would obviously have led to a significant amount of animosity from co-workers, and this would have been a significant element in the case of Enron, simply given the size of the entity and the repercussions of the reporting.

Not remaining anonymous would have had a huge impact of my decision to make the issue public. Had I been forced to report the case myself, I would rather have reported the issue to an anonymous hotline as opposed to my manager or anyone else in the company directly. If I were to be directly identified as the whistle blower, I feel I would be ostracized not only by my peers at Enron, but also permanently be an outcast, or be considered a ‘sell-out’ at every future potential employer.


• Barnes, Julian E. , et al., “How a Titan Came Undone,” U. S. News & World Report, March 18, 2002, pp. 26–36. • Cruver, Brian, Anatomy of Greed: The Unshredded Truth from an Enron Insider, New York, N. Y. : Carroll & Graf Publishers, 2002. • McLean, Bethany, and Peter Elkind, The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron, New York, N. Y. : Portfolio, 2003. • Conger, J. (1990) ‘The Dark Side of Leadership’, Organizational Dynamics, Autumn: 44–55. • http://www. ppionline. org/ppi_ci. cfm? knlgAreaID=125&subsecID=164&contentID=250321